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5. Understanding reorganization in bankruptcy Chapter 11 of the Bankruptcy Act has several features that can...

Question:

5. Understanding reorganization in bankruptcy Chapter 11 of the Bankruptcy Act has several features that can help a firm that

5. Understanding reorganization in bankruptcy Chapter 11 of the Bankruptcy Act has several features that can help a firm that is in financial distress. The debtor is to borrow funds for short-term liquidity after it files for bankruptcy under Chapter 11. allowed Filing for bank Chapter 11 requires the debtor to submit a reorganization plan to the bankruptcy court. The court's responsibility is to scrutinize the not allowed of reorganization. The court checks if the plan is fair and feasible.

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Answer:-

The debtor is allowed to borrow funds for short term liquidity after it files bankruptcy under chapter 11. In chapter 11 of filing bankruptcy the debtor-in-possession financing, or the money a lender provides to a company is usually used by a company to fund its operations while it goes through the bankruptcy process.

The lender of bankruptcy financing will be repaid before many other creditors, like previous lenders, employees, or suppliers.

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